Customer churn rate is the percentage of your customers or subscribers who cancel or don't renew their subscriptions during a given time period.
Churn rate is a critically important metric for companieswhose customers pay on a recurring basis -- like SaaS or other subscription-based companies. Regardless of your monthly revenue, if your typical customer does not stick around long enough for you to at least recoup your average customer acquisition cost (CAC), you're in trouble.
How to Reduce Customer Churn
1. Start customers off on the right foot.
You can work to prevent customer churn from the moment someone becomes a customer by creating a robust new customer onboarding process. Use a new customer welcome email, dedicated 1:1 and online customer onboarding, and create educational content on your blog, social media, and video channels to help educate customers and show them how to get optimal value from your product or service.
2. Ask for feedback at key moments.
Make sure you're consistently asking for customer feedback and key moments across the customer experience. If you've already identified that customers are likely to churn if they don't log into your online tool once every 15 days, ask them for feedback around day 10 to try to re-engage them. If they hit a milestone or goal using your product or service, ask them for feedback after that moment. Figure out the key moments that make or break a happy customer, and ask for feedback at those touchpoints to maintain the relationship.
3. Communicate proactively with customers.
Build rapport and good faith with your customers by communicating with them proactively so they view you as a trusted partner. Periodically reach out with content you think they'll find interesting or helpful, connect and engage with them on social media, and reach out if issues or outages crop up on the product side so they know they can depend on you.
4. Analyze churn when it happens to improve customer service.
Customer churn will happen, despite your best efforts, and when it does happen, use it as an opportunity to dig into what led the customer to leave, and what you can to do prevent a similar customer churning for the same reason in the future.
You can use instances of churn to dig into individual customer support rep or success manager performance, analyze your product or service against competitors customers leave you for, or identify core sharp edges in the customer experience that you want to prioritize in the quarter ahead with your product and development teams.
To calculate customer churn rate, designate a time period, and tally up the total number of customers you acquired and the number of customers who churned during that time period. Then, divide the number of customers who churned by the total number of customers acquired, and multiply that decimal by 100%, to calculate your churn rate.
So, for instance, if you have five customers cancel and you originally signed 200 customers during that time period, your churn rate would be 2.5%.